Brazil: Brazil’s distributors follow growth path

21 March 2014 10:03[Source: ICB]

Chemical distribution in Brazil has been progressing well over the past couple of years, affirms Rubens Medrano, president of Associquim, the country’s trade association for chemical and petrochemical distributors.

“Given the size of the country, distribution is very important in the chemical chain, linking chemical producers with industrial consumers. Most of the players are small and medium-sized enterprises, making distributors doubly important for chemical supply.”

“The proportion of chemical trade going through distributors at about 11% is still relatively low... This gives the distribution sector plenty of room to grow”

Rubens MedranoPresident, Associquim

Brazil’s chemical sector is large. The country is the sixth largest chemicals producer in the world, with a market estimated as worth $183bn (€131bn) in 2011. However, demand exceeds production, and in 2013, one-third of chemicals demand was satisfied by imports.

Chemical distributors saw their turnover in Brazil reach $6.6bn in 2013, says Medrano, a 10% increase on the year before in local ­currency terms, but only around a 2% ­increase in dollar terms, given the devaluation of the Brazilian real. He is confident that the sector will see continued growth, as ­companies continue to invest in their ­businesses, both in terms of sites, personnel and technical services.

“The number of distributors is not likely to rise in coming years,” he says, “but the proportion of chemical trade going through distributors at about 11% is still relatively low compared to the 20% or so in Europe and the US. This gives the distribution sector plenty of room to grow over the next couple of years.”

There is a currently a mix of smaller local players and a handful of international distributors that have been coming into the market recently, such as Brenntag, IMCD and Univar, explains Medrano. All offer a more-or-less national coverage across the country and handle domestic material as well as imports.

INTERNATIONAL SPEAKERS AT EBDQUIM

Every two years Associquim organises EBDQuim, the Latin American congress that brings together major national and international companies throughout the entire chain of chemicals, including producers, distributors, carriers and industrial consumers, to debate issues in chemical distribution, market trends, management strategies, benchmarking and networking.

This year’s event takes place on 18-19 March in Sao Paulo. Speakers will talk about the mission and values of the chemical distribution sector and include executives from Evonik, Braskem, Eastman, BASF and Dow Chemical, as well as chemical distribution trade associations from the US (Doug Brown from NACD) and Europe (Uta Jensen-Korte of Fecc).

These chemical distributors play an important role in the industry, says Medrano. “They not only supply chemicals but offer technical support and can help with regulatory matters. With Associquim’s mandatory PRODIR Responsible Distribution Process in operation, with third-party verification, users of chemical distribution can be certain of high levels of environmental and regulatory performance. Distributors can also help source materials from abroad, if they are not produced in Brazil, such as, say, fine chemicals, or when domestic production is not sufficient to meet local demand.”

However, Medrano is quick to point out that Brazil’s distributors are firmly committed to the Brazilian market and domestic producers, and act in a very professional and responsible manner. Part of the problem, he explains, is that while demand has been growing in the market, production has been largely stable in recent years, driving up the need for imports to satisfy domestic demand.

In terms of sector, Medrano points to several that are growing strongly at present: cosmetics and personal care and food ingredients. These are being driven by increasing numbers of middle class Brazilians who are eating more and paying more attention to their looks and well-being. “Purchasing power is developing,” says Medrano, “as lower classes become better off.”

Another sector doing well is paints and coatings, on the back of the government’s drive to stimulate housing construction, again to meet middle class aspirations for better housing. The government is offering guaranteed financial backing for housing developments, which is helping the coatings sector. Government-backed infrastructure developments in roads and ports are also stimulating demand and thus chemical distributors are taking their opportunities to increase investment, points out Medrano.

The outlook in Brazil is also picking up after a difficult couple of years in which chemical demand growth has been suppressed by lower than usual economic growth. Last year saw marginal 0.3% growth, as GDP growth slipped to 0.9% in 2012 and 2.4% in 2013. From 2014 to 2017, chemical production is predicted to grow by 3.5-3.7%/year, and to average 2.3%/year over the period 2019-2023, according to the American Chemistry Council. Brazil’s chemical distributors will be looking to capitalise on that growth, taking on more business as producers put more sales though distribution channels.